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EXHIBIT 99
SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
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The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
"safe harbor" for forward-looking statements to encourage companies to provide
prospective information about their companies, so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those discussed in the statement. Columbia Financial of
Kentucky, Inc. ("CFKY") desires to take advantage of the "safe harbor"
provisions of the Act. Certain information, particularly information regarding
future economic performance and finances and plans and objectives of management,
contained or incorporated by referencing CFKY's Quarterly Report on Form 10-QSB
for the quarter ended June 30, 1999, is forward-looking. In some cases,
information regarding certain important factors that could cause actual results
of operations or outcomes of other events to differ materially from any such
forward-looking statement appears together with such statement. In addition,
forward-looking statements are subject to other risks and uncertainties
affecting the financial institutions industry, including but not limited to, the
following:
Interest Rate Risk
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CFKY's operating results are dependent to a significant degree on its
net interest income, which is the difference between interest income from loans
and investments and interest expense on deposits and borrowings. The interest
income and interest expense of CFKY change as the interest rates and mortgages,
securities and other assets and on deposits and other liabilities change.
Interest rates may change because of general economic conditions, the policies
of various regulatory authorities and other factors beyond CFKY's control. The
interest rates on specific assets and liabilities of CFKY will change or
"reprice" in accordance with the contractual terms of the asset or liability
instrument and in accordance with customer reaction to general economic trends.
In a rising interest rate environment, loans tend to prepay slowly and new loans
at higher rates increase slowly, while interest paid on deposits increases
readily because the terms to maturity of deposits tend to be shorter than the
terms to maturity or prepayment of loans. Such differences in the adjustment of
interest rates on assets and liabilities may negatively affect CFKY's income.
Moreover, rising interest rates tend to decrease loan demand in general,
negatively affecting CFKY's income.
Possible Inadequacy of the Allowance for Loan Losses
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Columbia Federal Savings Bank ("Columbia Federal") maintains an
allowance for loan losses based upon a number of relevant factors, including,
but not limited to, trends in the level of nonperforming assets and classified
loans, current and anticipated economic conditions in the primary lending area,
past loss experience, possible losses arising from specific problem assets and
changes in the composition of the loan portfolio. While the Board of Directors
of Columbia Federal believes that it uses the best information available to
determine the allowance for loan losses, unforeseen market conditions could
result in material adjustments, and net earnings could be significantly
adversely affected if circumstances differ substantially from the assumptions
used in making the final determination.
Loans not secured by one-to four-family residential real estate are
generally considered to involve greater risk of loss than loans secured by one-
to four-family residential real estate due, in part, to the effects of general
economic conditions. The repayment of multifamily residential and nonresidential
real estate loans generally depends upon the cash flow from the operation of the
property, which may be negatively affected by national and local economic
conditions that cause leases not to be renewed or that negatively affect the
operations of a commercial borrower. Construction loans may also be negatively
affected by such economic conditions, particularly loans made to developers who
do not have a buyer for a property before the loan is made. The risk of default
on consumer loans increases during periods of recession, high unemployment and
other adverse economic conditions. When consumers have trouble paying their
bills, they are more likely to pay mortgage loans than consumer loans, and the
collateral securing such loans, if any, may decrease in value more rapidly than
the outstanding balance of the loan.
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Competition
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Columbia Federal competes for deposits with other savings associations,
commercial banks and credit unions and issuers of commercial paper and other
securities, such as shares in money market mutual funds. The primary factors in
competing for deposits are interest rates and convenience of office location. In
making loans, Columbia Federal competes with other savings associations,
commercial banks, consumer finance companies, credit unions, leasing companies,
mortgage companies and other lenders. Competition is affected by, among other
things, the general availability of lendable funds, general and local economic
conditions, current interest rate levels and other factors that are not readily
predictable. The size of financial institutions competing with Columbia Federal
is likely to increase as a result of changes in statutes and regulations
eliminating various restrictions on interstate and inter-industry branching and
acquisitions. Such increased competition may have an adverse effect upon CFKY.
Legislation and Regulation that may Adversely Affect CFKY's Earnings
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Columbia Federal is subject to extensive regulation by the Office of Thrift
Supervision (the "OTS") and the Federal Deposit Insurance Corporation (the
"FDIC") and is periodically examined by such regulatory agencies to test
compliance with various regulatory requirements. As a savings and loan holding
company, CFKY is also subject to regulation and examination by the OTS. Such
supervision and regulation of Columbia Federal and CFKY are intended primarily
for the protection of depositors and not for the maximization of shareholder
value and may affect the ability of the company to engage in various business
activities. The assessments, filing fees and other costs associated with
reports, examinations and other regulatory matters are significant and may have
an adverse effect on CFKY's net earnings.
The FDIC is authorized to establish separate annual assessment rates
for deposit insurance of members of the Bank Insurance Fund (the "BIF") and the
Savings Association Insurance Fund (the "SAIF"). The FDIC may increase
assessment rates for either fund if necessary to restore the fund's ratio of
reserves to insured deposits to the target level within a reasonable time and
may decrease such rates if such target level has been met. The FDIC has
established a risk-based assessment system for both SAIF and BIF members. Under
such system, assessments may vary depending on the risk the institution poses to
its deposit insurance fund. Such risk level is determined by reference to the
institution's capital level and the FDIC's level of supervisory concern about
the institution.
Congress recently enacted a plan to recapitalize the SAIF. The
recapitalization plan also provides for the merger of the SAIF and BIF effective
January 1, 1999, assuming there are no savings associations under federal law.
Although it now seems unlikely that Congress will eliminate the federal
thrift charter, legislation is currently being considered that may change the
range of activities in which various types of financial institutions and their
holding companies, including Columbia Federal and CFKY, may engage. Although
CFKY cannot predict when or whether this "financial modernization" legislation
will be passed or what its effects on CFKY and Columbia Federal will be, it is
not anticipated that the current activities of CFKY and Columbia will be
materially affected.